Troubles at Mondelez are an Open Door For Activist Investors

Under heavy pressure from activist investor Nelson Peltz, Mondelez is looking to cut costs and return more cash to shareholders. But the snack company, formerly part of Kraft Foods, reported sales growth for the latest quarter that came in lower than what was predicted.

The “lackluster quarter” and tempered sales forecast the year could potentially “open the door for Peltz to get more active,” said Alexia Howard, and analyst at Bernstein.

Mr. Peltz’s Trian Fund Management in July suggested PepsiCo’s snack business and Mondelez merge. Then last week, Mr. Peltz gave a surprise presentation to investors accusing Mondelez of not doing enough to cut costs.

In the past few months, Mondelez CEO Irene Rosenfeld has come out with a $6 billion share buy-back plan and a major productivity overhaul that is expected to save more than $3 billion over the next three years.

The company is building more modern manufacturing plants that they say can double the capacity of Oreo production in half the space as the older ones. And since that’s going so well, they plan to do it with other brands’ production lines too. In fact, news this week of the potential closing of one of Mondelez’s plants in Philadelphia, comes as the company is considering opening facilities in New Jersey that will be of this more modern, efficient variety.

The company is considering more investment in its North American biscuit business, “but it would require some consolidation of our current manufacturing network,” a spokeswoman told the Wall Street Journal.

Mr. Peltz would probably be pleased about the cost savings.

On a conference call with analysts Wednesday, Ms. Rosenfeld acknowledged the frustrations and concerns of certain “investors.” She said there was “certainly some frustration about our ability to deliver on expectations,” and that there was concern that Mondelez’s revenue targets were “too aggressive, especially in the current environment as we have seen our categories slowing.”

But she said the meetings with these investors were productive. “They give us a lot of insight in terms of how they’re thinking about the business, and it gave us an opportunity to talk about how we see the business.”